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High Road Workplace

Worker-Owned Companies

ASBC believes support for worker-owned companies (ESOP’s and Cooperatives) can play a powerful role in building a sustainable economy and restoring the American Dream to the millions who continue to struggle.

The growth of economic inequality has convinced millions of Americans that our economy is failing them. For many people, the link between hard work and reward has grown fragile, depressing the entrepreneurial spirit that creates companies and helps them to grow and thrive.

Worker-owned companies have a solid track record of increasing wages, strengthening local economies, and saving companies that otherwise might close. Also, they’re resilient. During the Recession, they had fewer layoffs, higher survival rates, and faster recoveries.

Worker-owned companies let more Americans share in their company’s success, rather than directing gains to just the top. And when workers buy a company, they buy equity in the business. When that equity grows in value, its growth boosts retirement savings. Congress needs to take action to support the creation and growth of worker-owned companies.

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Dear Member of Congress:

To rebuild the middle class, we call on Congress to support worker-owned companies. Worker-owned firms, including Employee Stock Ownership Plans (ESOPS) and Cooperatives, have a track record of growing and stabilizing local economies, improving wages and saving viable companies. During the Recession, they had fewer layoffs, higher survival rates and recovered faster.

Worker ownership helps solve two critical challenges:

The transition/succession crisis -- up to 20,000 viable businesses a year need buyers or planning to close in the next decade as millions of Baby Boomer-owners retire, and

The retirement-savings crisis – too few American workers are saving enough for their retirement. The 2013 median retirement savings is $3,000 for working-age households and $12,000 for households near retirement.

Worker ownership is a smart, bipartisan idea that both creates capitalists and improves incomes. . Congress should encourage this great American tradition.

Respectfully,

Latest Developments

Latest Developments:

President Trump has proposed an FY2018 budget that includes major spending cuts. Also, the President and Congress want to reform the business side of the tax code. Care must be taken to protect worker-ownership supports (in tax law and services), and if possible, to strengthen them.

There are two big bills before the House and Senate tax committees. The first would give S Corp ESOP owners the capital gains deferral now available to C Corp ESOP owners. The second would enable employees to defer taxes for up to 7 years on stock they get from their employer.

Senator Bernie Sanders (I-VT) has reintroduced two worker ownership bills. These are the WORK Act, S. 1081, which creates a Labor Department initiative to promote worker-ownership through grants to state programs, and the U.S. Employee Ownership Bank Act, S. 1082, which creates a new bank to help traditional companies finance their transition to worker-ownership.

ASBC has been working with Sen. Kirsten Gillibrand (D-NY)—who cosponsored Sanders’s bills—as she crafts her own legislation to advance worker-ownership, and has been joined in this effort by 1worker1vote, the Rocky Mountain Employee Ownership Center, and the U.S. Federation of Worker Cooperatives among other groups.

The 2016 Republican Platform endorsed the creation of ESOPs, saying the future relationships of work will be built on “employee empowerment and workplace flexibility. We therefore endorse employee stock ownership plans that enable workers to become capitalists, expand the realm of private property, and energize a free enterprise economy.”

ASBC continues to make good progress at building a business case for enhanced federal support for worker ownership. We’ve spoken with a number of Congressional offices and among others, have worked with the staff of Rep. Jared Polis (D-CO, 2nd District). Polis is vice chairman of the New Democrats Coalition. Over the next month, ASBC will host presentations on worker ownership for the staff and members of the New Democrats Coalition.

Background

Background:

The U.S. government has a tradition of providing workers access to capital.

The Founding Fathers made federal lands available at low prices for citizens to acquire a homestead. President Jefferson made almost one million square miles available through the Louisiana Purchase. President Lincoln set aside 270 million acres—10 percent of the country’s landmass—as part of the 1862 Homestead Act for the purpose of fostering greater economic self sufficiency.

For more than a century, cooperatives have been an essential part of the success of U.S. agriculture. Today, they number more than 3,000, have a combined membership of 2.8 million, a net income of nearly $1.2 billion, and net business volume of more than $96 billion.

The 2016 Republican Platform endorsed the creation of ESOPs, saying the future relationships of work will be built on “employee empowerment and workplace flexibility. We therefore endorse employee stock ownership plans that enable workers to become capitalists, expand the realm of private property, and energize a free enterprise economy.”

In recent years, a number of bills have been introduced in Congress to support worker ownership. In 2014, Sen. Bernie Sanders (I-VT) introduced two such bills. The first bill would establish a U.S. Employee Ownership Bank. The second bill would create a Department of Labor initiative to promote employee ownership.

At present, there are several ownership bills before the House and Senate tax committees. The first would give S Corp. ESOP owners the capital gains deferral now available to C Corp. ESOP owners. The second would enable employees to defer taxes for up to 7 years on stock given them by their employer.

What's at Stake

What's at Stake:

Ever-increasing economic inequality has convinced millions of Americans the U.S. economy is failing them. Congress can reverse this decline and rebuild the middle class by supporting worker ownership of companies. It’s a proven way to increase wages, build wealth, strengthen companies and save communities.

Ownership is key: The exponential wealth increase of the top percentage of Americans has resulted from their ownership of capital and capital income. Bill Gates, Warren Buffett, and the Koch brothers alone have as much wealth as the 128 million people in the bottom 40 percent, according to Having a Stake, a new report from centrist think tank The Third Way.

It’s crucial to act now, because the inequality will get worse if we don’t address two crises:

The business-transition crisis: Up to 20,000 businesses a year over the next decade will be sold or shut down as millions of baby-boomer owners retire. Without buyers, these viable businesses will be forced to move, shrink, or close, and if they move or close, tens of thousands of people will lose their jobs, hurting both them and their communities.

The retirement-savings crisis: Americans are saving too little. The median retirement account balance for working-age households is just $3,000; for households near retirement, just $12,000, the National Institute on Retirement Security reported in 2013. Employee ownership can help to address this problem by providing workers with a share of their company’s profits as well as good-paying jobs rooted in their local economy.

In the past 30-plus years, the link between productivity and reward has grown more fragile for many employees, depressing the entrepreneurial spirit that makes companies grow and thrive. Worker-owned companies allow more Americans to share in a firm’s success, rather than concentrating the gains at the top executive level.

They have a strong track record moreover. For more than a century, cooperatives have been an essential part of the success of U.S. agriculture. Today, they number more than 3,000, have a combined membership of 2.8 million, a net income of nearly $1.2 billion, and net business volume of more than $96 billion.

There were an estimated 10,300 corporations with ESOPs and similar plans by 2013, mostly small – and medium-size businesses, with just over 10 million workers and almost a trillion dollars in total value, according to The Citizen’s Share: Reducing Inequality in the 21st Century.

ASBC believes that worker ownership must be an essential part of building a sustainable economy and restoring the American Dream to the millions of people who have lost ground. Worker ownership can add immense value, by reducing income inequality, stabilizing local communities, and building a stronger middle class.